Copper Prices: Why Investors Should Be Bullish On Copper (JJC, FCX, BHP, SCCO, COPX, CU)

Michael Adams: Global economic uncertainty can create a volatile metals sector and lead some investors to bail on the industry  altogether. But doing so would mean missing the huge profit opportunities from rising copper prices in 2012.

With uses in both manufacturing and construction, copper remains one of the world’s most versatile metals. When  economies are doing well, copper prices do well due to increased demand.

Currently, global economic woes are still around us. Greece is still on the fritz, and European uncertainty is weighing  on growth – which caused a slip in copper.

Copper prices fell close to $3.00  per pound in September. They’ve climbed back to around $3.90 per pound, but are  still about 18% from where they were a year ago.

The uncertain European outlook has triggered concern for one  of its biggest trading partners as well as copper’s ultimate buyer: China.

China is the world’s biggest producer and consumer of copper, soaking up 40% of the world’s supply.

Europe’s economic effect on China has led to fear that the  Red Dragon is headed for a cool down this year and that the slowed growth will weigh on copper prices.

The International Monetary Fund (IMF) predicts Chinese  growth to proceed at a rate of 8.2% this year, down a full percentage point  from last year’s actual growth of 9.2%.

These concerns, however, are overblown – and off the mark.  What’s actually going on in the Chinese economy and copper market is supporting rising copper  prices.

Here’s why you, too, should be bullish on copper.

Three Ways to Play Rising Copper Prices

The world’s major copper producers were hit hard in the fall  months when copper prices slipped.

With the last few quarters’ of copper output having been  relatively stagnant, we’ll be seeing the big mining companies working hard to get  ready to meet the supply shortage.

It looks like they’ll spend the first part  of this year increasing capital output to ramp up lagging copper production to  meet global demand.

As these mining giants work hard to produce more copper, the  companies that support their operations will become more vital.

That’s bullish for mining services companies like Boom Logistics, which just signed a $105.17 million ($100 million Australian) contract with BHP Billiton Ltd. (NYSE:BHP).

Boom Logistics signed a five-year deal with BHP Billiton to provide maintenance operations at BHP’s Olympic Dam in South Australia.

As the fourth largest copper deposit and with direct deliveries  to the Chinese stockpile, this recently inked Olympic Dam contract is sure to  send Boom Logistics’ currently struggling stock up a few notches, making it a  good buy for anyone with access to the Australian exchange.

Investors looking for a more straightforward play should consider copper mining giant Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX).

The slight dip in this mammoth company’s recent stock price  is due to investor concern over slowing Chinese growth uncertainty out of  Europe (remember: copper prices trace economic fluctuations) – which presents a good buying opportunity.

Wall Street’s one-year price target for FCX is $54.26 – a 42% gain from Monday’s $38.26 closing price. Freeport also offers a dividend  yield of 2.6%.

Finally, a general way to profit from rising copper prices  is the iPath DJ-UBS Copper TR Sub-Index ETN (NYSEArca:JJC), which tracks the price of copper futures contracts less fees and expenses. The index mirrors copper price performance and is up 13% already this year.

But let’s face it… it’s not just copper prices that are  expected to climb.

Soon virtually every substance vital to modern life will become enormously expensive and profitable for investors who know how to play it.

As commodities and mining expert Peter Krauth explains in his latest  report, “today’s scarcity and soaring costs could spur the biggest investment gains in history.”

To read Peter’s latest free report click here.

Related: First Trust ISE Global Copper Index Fund (NASDAQ:CU), Global X Copper Miners ETF (NYSEArca:COPX), Southern Copper (NYSE:SCCO).

Written By Michael Adams From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially ; and a technological revolution even in the most distant markets on the planet. And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.

Leave a Reply

Your email address will not be published. Required fields are marked *